The government isn’t a business or household.
Democrats should reject ‘pay-go’.
In an outline of the legislative agenda House Democrats plan to pursue should they win the majority this election, Minority Leader Nancy Pelosi has promised to bring back the “pay-go”mandate. This rule basically means that Congress can authorize new government payments only if it “finds the money” from the private sector or cuts some other government program. In other words, it prohibits our nation from deploying our sovereign currency — the U.S. dollar — in the service of the country.
By tying her party to this misguided ordinance, Pelosi has committed a major act of self-sabotage.
To start, the “pay-go” rules established by Congress serve no public purpose. In a scathing article in The Intercept, David Dayen outlines the economic and political folly of this kind of policy. There is nothing fiscally responsible about tying public investments to tax receipts. The belief that the issuer of a currency should operate under the same rules as households and businesses is fundamentally misguided. Businesses and households alike borrow money for investing and spending, respectively. But our federal government is not like a household or a business — it makes the money it invests.
Let me be very clear: Congress has the power to create dollars. It never needs to receive back a dollar it previously created before it can create another one. It has a limitless capacity to deploy the nation’s currency in the service of public needs. Every time Congress authorizes a payment, the Department of the Treasury will make that payment via its account at the Federal Reserve. There will never be a payment that Congress authorizes that won’t be paid fully and without default, as the only way it could default is by choice.
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